Nigel Rawson is an affiliate scholar with the Canadian Health Policy Institute and a senior fellow with the Macdonald-Laurier Institute.
Over the past six years, the Patented Medicine Prices Review Board – Canada’s federal drug-price regulating agency – has sought to impose lower drug costs when new pharmaceuticals are introduced here. But the main achievement of that crusade is that fewer new medicines are now available to Canadians.
In order for medicines to hit the market here, manufacturers must submit them for regulatory authorization. Between 2006 and 2014, 80 per cent of new drugs submitted for regulatory approval in the United States or the European Union were also submitted for approval in Canada. But by 2020, that rate had fallen to just 44 per cent – a reflection of industry uncertainty.
That began in May, 2017, when then-health minister Jane Philpott set out to revise the PMPRB’s regulations. To justify the changes, she noted that prescription-drug spending represented 10 per cent of total health care spending in 1984, while in 2017 it was 14 per cent, where it remains today.
The plan was to replace two higher-price countries in the PMPRB’s 35-year-old price comparison test with six lower-price countries, implement untried “pharmacoeconomic” tests to determine prices, and require drug developers to report any confidential rebates negotiated with public and private insurers. The only measure that survived legal challenges, however, was the change in comparator countries. Without evidence of excessive pricing, the courts ruled in 2020 that the PMPRB is “not empowered to control or lower prices.”
In 2022, the PMPRB tried again. Instead of using its price-reference test with the new countries, the board invented new and complicated ways to try to severely reduce drug prices. Unlike the 2017 guidelines, the 2022 version was short on detail, although the board tried to be more intimidating by threatening to launch an investigation if it decided a manufacturer’s list price wasn’t low enough.
By focusing on mandating prices, rather than assessing whether they are excessive, the PMPRB appeared to flout the Federal Court of Appeal’s unanimous decision in 2021 that “excessive pricing provisions in the Patent Act are directed at controlling patent abuse, not reasonable pricing, price-regulation or consumer protection at large.”
Today, federal Health Minister Jean-Yves Duclos and the Liberal government have wisely decided not to proceed with further changes to the PMPRB regulations. This shift has been criticized on several occasions in the news media, with the government accused of capitulating to the biopharmaceutical industry. Politicians have made similar allegations.
This insinuation was also made several weeks ago in PMPRB member Matthew Herder’s resignation letter. Joining the chorus were former board chair Mitchell Levine and, in these pages, Ms. Philpott, criticizing what they see as a lack of resolve in the federal government.
But the withdrawal of the proposed changes was not a case of acquiescing to the industry. It happened because the PMPRB and its staff’s apparent hostility to the industry was unconstitutional.
In his letter, Mr. Herder praised the integrity and expertise of PMPRB staff. However, their integrity and impartiality are questionable when freedom of information requests reveal the board and its staff’s disrespect for the drug developers they regulate, stating that the industry is putting “profits first and patients a distant second,” and “has been sucking Canada for decades.”
The resignation letter of Mélanie Bourassa Forcier, the board’s acting chair, was also revealing. She wrote, as translated from French, that there is a “dialogue of the deaf that has been going on for years between the pharmaceutical industry and the PMPRB, which has resulted in costly legal proceedings for Canadians that could have been avoided.” Her ideas to re-examine pricing policy and methods and her “concerns about the legality of part of the reform” were ignored by the board.
The PMPRB has outlived its usefulness and should be disbanded. If it is to remain, the federal government must clean it out. In February, Thomas Digby, an intellectual-property lawyer with more than 25 years of experience working with the pharmaceutical sector, was appointed as the board’s new chair. This may be a step in the right direction, but that remains to be seen.
Everyone would like drugs to be cheaper, but not at the expense of having pharmaceutical companies and their innovative medicines bypass Canada. Several adversarial barriers to launching novel medicines already exist in this country, and Canadians don’t need additional anti-industry zealotry from their own federal agencies to deter developers. Without a collaborative relationship between manufacturers and governments, Canadians with unmet health needs will continue to suffer.